Top Reasons for Avoiding Unwritten Contracts
Here in San Diego and the rest of the Golden State, certain types of unwritten contracts can be enforced in the courts. Certain contracts, like contracts for the sale and purchase of real estate, must be in writing, but a lot of other contracts can be enforced even if they are oral contracts or contracts implied by the conduct of the parties.
That being said, there are many important reasons for not using unwritten contracts. It is crucial to have your business contracts custom-crafted by an experienced San Diego corporate attorney. Here are some of the top reasons for avoiding unwritten contracts.
More Difficult to Prove
If your business if forced to file a lawsuit to enforce an unwritten contract, the evidence needed for proof and winning your case is much more difficult to provide. Essentially, you must have testimony from the individuals who made the oral contract or testimony about the various conduct that created the contract. If any significant time has elapsed, getting the witnesses into court can be difficult; much more difficult than copying a written contract and providing the copies to the court. The other problem here is that memories fade over time. The relevant witnesses may not have a good memory of what was agreed to or their memories may conflict. This is not to suggest bad faith; rather, as noted, memories fade over time. Written contracts are more reliable in terms of proof.
Oral Testimony can be Conflicting, Leaving Your Business at Risk
A related point is that, if proof is needed based on testimony, the testimony can be inconsistent. When this happens, a judge or jury must decide whose memory is better. This puts your business at risk of an adverse decision. A written contract avoids this problem since there is no dispute about what words are written. Any dispute is about how to interpret the words, which is less risky legally and financially.
Unwritten Contracts Rarely Cover the Necessary Contingencies
Every contracting situation is unique and, as a consequence, any well-drafted contract must cover at least of the few foreseeable contingencies. For example, what happens if there is a problem with the supply chain or some raw material becomes unavailable? A good written contract will cover such eventualities by, maybe, allowing more time to complete the contract or allowing the parties to declare the contract void or some other resolution.
Important “Boilerplate” is Missing From Unwritten Contracts
Written contracts, particularly those drafted by an experienced San Diego corporate attorney, almost always contain “boilerplate” provisions. Boilerplate provisions generally have a “bad name” among nonlawyers. But, boilerplate provisions are important and do not deserve their “bad name.” Lawyers include such provisions for legitimate legal and business reasons. Consider, for example, a choice of law provision which provides that the contract will be governed by the laws of the State of California (or some other State). Which law governs can be very important since different States have different laws. One can almost guarantee that the parties to an unwritten contract did not even consider a choice of law provision in their unwritten agreement.
Call San Diego Corporate Law Today
For more information, call experienced business attorney Michael Leonard, Esq., of San Diego Corporate Law. Call Mr. Leonard at (858) 483-9200 or contact him via email. Mr. Leonard’s law practice is focused on business, transactional, and corporate matters and he proudly provide legal services to business owners in San Diego and the surrounding communities. Like us on Facebook.